Marks & Spencer set to deliver half year loss as pandemic weighs on clothing sales

Investors are prepared for the retailer to reveal a knock from Covid-19 but will be particularly keen for an update on its Never the Same Again programme, to accelerate its transformation into a more streamlined and digitally focused business.

In August, the company said it would cut around 7,000 jobs as part of a major restructuring plan.

In the same update, it said food sales had remained resilient in the face of the virus but lower clothing and home sales weighed on profitability.

A consensus of analysts has predicted M&S will deliver a £59 million pre-tax loss when it confirms its half-year trading performance on Wednesday November 4.

The high street stalwart is expected to report 0.3% growth in like-for-like food sales for the period, while like-for-like clothing and home sales are expected to be 41% lower for the half after enforced store closures.

M&S reported a 1.1% decline in food sales in the 19-week period to mid-August but said this was rapidly improving, with 2.5% growth in the last eight weeks of this period.

Meanwhile, clothing and sales were also improving. It said sales for the department were 49.5% lower for the 19-week period which included closures, but improved to a 29.9% decline over the latter eight weeks.

Sophie Lund-Yates, equity analyst at Hargreaves Lansdown, said she suspects the retailer’s reliance on stronger food trading “hasn’t reversed” in recent months.

“The beat on trading in August has been driven by food, while clothing and home has really struggled,” she said.

“This dynamic was true before the pandemic, but a lacklustre online presence means this fault line has been exacerbated.”

Analysts at Barclays have said they expect a “decent profit” in the food business to be “offset by a sizeable loss in clothing and home”.

However, they also said the contribution from M&S’s joint venture with Ocado is expected to be better than previously predicted.

Shareholders will be keen to get an update on the progress of the £1.5 billion partnership, after Ocado switched to working with M&S from Waitrose at the start of September.

The company has strong links with Yorkshire. Marks & Spencer was formed in 1884 when Michael Marks, a Polish refugee opened a market stall in Leeds, with the slogan ‘don’t ask the price, it’s a penny’. In 1894 Marks went into partnership with Thomas Spencer, a former cashier from the wholesale company, Dewhirst.

Mr Spencer was born in Skipton in 1851 and moved to Leeds as a 21-year-old to further his ambitions. In 1904 Marks & Spencer opened its first shop in a covered arcade in Leeds.

Marks & Spencer Limited became a public company in 1926.

In March 2013 the company returned to its roots and opened a stall at Kirkgate Market in Leeds, the same place that Michael Marks opened the first Penny Bazaar stall.

The relocation of the M&S company archive in 2012 created the foundation for a unique relationship with the University of Leeds. The partnership offers a broad range of opportunities to support young people into the workplace.

Since opening in 2012, the university and M&S have collaborated on research projects in areas as diverse as international business and gender diversity.